House Financial Services hearing exposes sharp divisions over 'Clarity Act' market-structure bill

The House Committee on Financial Services continued a hearing on the proposed "Clarity Act," a bipartisan market‑structure bill intended to set rules for non‑security digital assets, with witnesses and members sharply divided over whether the draft would protect consumers and national security or create loopholes.

The committee heard testimony from academics and policy advocates who argued the bill contains major gaps in enforcement, anti‑money‑laundering (AML) standards and cybersecurity protections, and that its definitions and exemptions could allow many tokens to avoid securities or commodities rules. Supporters said the bill fills a regulatory vacuum and is necessary to keep innovation in the United States.

Carol House, a senior fellow at the Atlantic Council Geoeconomic Center, told the committee: “The current alignment and implementation of protections and digital assets is not working,” and said the Clarity Act’s text is “overly complex” in ways that could weaken consumer and market protections and leave national‑security vulnerabilities unaddressed. House recommended a “legislative framework for joint regulatory action by the SEC and CFTC,” citing Dodd‑Frank precedent for shared authorities.

Professor Hillary Allen of American University warned that the bill treats decentralization as if it were a reliable legal shield. “The most glaring fiction in this bill is the idea that the use of blockchain technology guarantees decentralization of economic power,” she said, arguing the statute could let issuers claim decentralization to avoid securities law coverage.

Amanda Fisher, policy director and COO at Better Markets, criticized the bill’s offering and trading regimes as permissive and said Congress is “blowing a hole” in post‑Depression investor protection laws by deferring broadly to crypto platforms and by routing most market authority to the CFTC, an agency she said was not designed for retail investor protection. Fisher highlighted gaps she said could enable repeat versions of failed crypto lending models such as BlockFi and Celsius.

Timothy Massett, director of the Digital Assets Policy Project at Harvard Kennedy School and former CFTC official, said the Clarity Act would not deliver the promised clarity and urged a simpler, “do no harm” approach that preserves existing securities and commodities rules while creating joint agency pathways to regulate spot digital asset markets.

Members pressed witnesses on specific issues raised in the bill. Representative Jim Himes and others questioned carve‑outs that would treat some tokens as “collectibles” or otherwise exempt them from commodity or securities regimes; witnesses warned those labels could be used to avoid disclosure and enforcement. Witnesses and members discussed the technological and legal limits of “self custody,” with several witnesses and members noting that irreversible blockchain transactions increase fraud and recovery challenges.

Lawmakers and witnesses also debated AML and identity approaches. Representative Bill Foster and others argued for mandatory know‑your‑customer (KYC) on wallets to create legal traceability; witnesses said KYC could reduce some illicit uses but warned that open‑source “mixers” and policy decisions on enforcement would affect outcomes. Carol House and other witnesses said enforcement capacity and resourcing at agencies are essential for any statutory regime to protect markets and national security.

Several Democratic members used the hearing to press allegations about President Trump’s business activities tied to crypto. Ranking Member Maxine Waters and other Democrats asserted that the president and his family have used crypto for personal enrichment; those are political allegations made during committee remarks and were framed in the hearing as objections to advancing the bill without addressing conflicts and potential corruption. Representative Bartlett Naylor and others urged the committee to seek Government Accountability Office review and additional investigations; those requests were presented as policy options rather than enacted findings.

The hearing also included focused questions about how the bill would treat stablecoins and remittances, DeFi protocols, and decentralized validators. Some supporters, including committee leaders, argued the bill is necessary to bring crypto activity and capital formation back onshore. Multiple witnesses and members referenced the Financial Stability Oversight Council (FSOC) recommendation that Congress provide a statutory framework and more regulatory authority over spot digital asset markets.

Committee procedure and next steps were noted at the end of the session. Chairman Hill and the subcommittee chair emphasized bipartisan work toward markup, and the chair asked witnesses to submit written responses; the committee set a deadline in the hearing record for witness responses.

Two witnesses and multiple members urged joint SEC–CFTC rulemaking and clearer, enforceable AML, cybersecurity and disclosure standards before moving to final votes. Several members said they would continue to press technical amendments and agency consultation as the bill advances.

The hearing record contains multiple contested factual claims about private sector transactions and individual actors that committee members presented during statements; the committee made witnesses’ written testimony part of the public record and requested follow‑up written answers from witnesses by the date stated in the hearing transcript.